Frankfurt am Main, April 03, 2013 -- Moody's Investors Service has today confirmed the ratings of FTA Santander
Consumer Spain Auto 2010-1's class A and B notes and the
ratings of FTA Santander Consumer Spain Auto 2011-1's class
A, B and C notes. At the same time, Moody's upgraded
the class C notes to A3 (sf) from Baa2 (sf) of FTA Santander Consumer
Spain Auto 2010-1. Sufficient credit enhancement,
which protects against sovereign and counterparty risk, primarily
drove the rating action.
For a detailed list of the affected ratings, see towards the end
of the ratings rationale section.
RATINGS RATIONALE
Today's rating action primarily reflects the availability of sufficient
credit enhancement to address sovereign risk and increased counterparty
risk. Moody's introduction of new adjustments to its modelling
assumptions has had no negative effect on the ratings of all classes of
notes in both transactions. The adjustments account for (1) the
effect of deterioration in sovereign creditworthiness; (2) the revision
of key collateral assumptions; and (3) increased exposure to low-rated
counterparties.
The current level of credit enhancement available under the class C notes
of FTA Santander Consumer Spain Auto 2010-1 in the form of cash
(via the reserve fund of 37.2%) is sufficient to support
an upgrade to A3 (sf) from Baa2 (sf).
-- Sovereign Risk
Moody's has supplemented its analysis to determine the loss distribution
of securitised portfolios with two additional factors, the maximum
achievable rating in a given country (the Local Currency Country Risk
Ceiling, or "LCC") and the applicable portfolio credit
enhancement for this rating. With the introduction of these additional
factors, Moody's intends to better reflect increased sovereign
risk in its quantitative analysis, in particular for mezzanine and
junior tranches.
See "Structured Finance Transactions: Assessing the Impact of Sovereign
Risk" for a more detailed explanation of the additional parameters.
This report is available on www.moodys.com and can be accessed
via the following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988.
The Spanish country ceiling is A3, and is therefore the maximum
rating that Moody's will assign to a domestic Spanish issuer including
structured finance transactions backed by Spanish receivables.
The portfolio credit enhancement represents the required credit enhancement
under the senior tranche for it to achieve the country ceiling.
By lowering the maximum achievable rating, the revised methodology
alters the loss distribution curve and implies an increased probability
of high loss scenarios.
Under the updated methodology incorporating sovereign risk on ABS transactions,
loss distribution volatility increases to capture increased sovereign-related
risks. Given the expected loss of a portfolio and the shape of
the loss distribution, the combination of the highest achievable
rating in a country for SF and the applicable credit enhancement for this
rating uniquely determine the volatility of the portfolio distribution,
which is typically measured as the coefficient of variation (COV) for
ABS transactions. All things equal, a higher applicable CE
for a given rating ceiling or a lower rating ceiling with the same applicable
CE both translate into a higher COV.
-- Revision of Key Collateral Assumptions
Moody's maintained its default and recovery rate assumptions for both
transactions, which it updated on 21 December 2012 (see "Moody's
updates key collateral assumptions in Italian and Spanish ABS transactions
backed by portfolio of consumer and auto loans" [http://www.moodys.com/research/Moodys-updates-key-collateral-assumptions-in-Italian-and-Spanish-ABS--PR_262879]).
According to the updated methodology, Moody's increased the CoV,
which is a measure of volatility.
For FTA Santander Consumer Auto 2010-1, Moody's increased
its volatility (CoV) to 49.35% from 35%, which
together with a mean DP of 10% and a recovery rate of 35%,
correspond to a portfolio credit enhancement of 20%.
For FTA Santander Consumer Auto 2011-1, Moody's increased
its volatility (CoV) to 49.22% from 35%, which
together with a mean DP of 10% and a recovery rate of 35%,
correspond to a portfolio credit enhancement of 20%.
-- Moody's has considered Exposure to Counterparty
Risk
The conclusion of Moody's rating review also takes into consideration
the exposure to weakened counterparties acting either as originator,
collection agent, issuer account bank or swap counterparty.
The inability of key transaction parties to perform their roles and difficulty
in replacing them increase the risk of payment disruption and performance
deterioration in structured finance transactions.
In both transactions, Santander Consumer, E.F.C,
S.A (Parent company: Santander Consumer Finance Baa2/P-2)
acts as servicer and transfers collections on a monthly basis (FTA Santander
Consumer Spain Auto 2010-1) or every 48 hours (FTA Santander Consumer
Spain Auto 2011-1) to the Issuer account bank Santander UK PLC
(deposits A2/P-1 negative, standalone bank financial strength
rating C-/baseline credit assessment baa1, negative).
The reserve funds reside at Santander UK PLC. Moody's has incorporated
into its analysis the potential default of both counterparties,
which could expose the transaction to a commingling loss on the collections
and a loss on the reserve fund.
Banco Santander SA (Baa2/P-2) acts as swap counterparty in both
transactions. As part of its analysis, Moody's assessed the
exposure to the swap counterparty, which does not have a negative
effect on the rating levels at this time.
OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES
In consideration of Moody's new adjustments, any further sovereign
downgrade would negatively affect structured finance ratings through the
application of the country ceiling or maximum achievable rating,
as well as potentially increased portfolio credit enhancement requirements
for a given rating.
As the euro area crisis continues, the ratings of structured finance
notes remain exposed to the uncertainties of credit conditions in the
general economy. The deteriorating creditworthiness of euro area
sovereigns as well as the weakening credit profile of the global banking
sector could negatively affect the ratings of the notes.
Additional factors that may affect the ratings are described in "Approach
to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow
Transactions: Request for Comment" (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF289772),
published on 2 July 2012.
In reviewing these transactions, Moody's used ABSROM to model the
cash flows and determine the loss for each tranche. The cash flow
model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche."
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
When remodelling the transactions affected by today's rating actions,
some inputs have been adjusted to reflect the new approach described above.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating European Auto ABS ", published in November 2002.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The revised approach to incorporating country risk changes into structured
finance ratings forms part of the relevant asset class methodologies,
which Moody's updated and republished or supplemented on 11 March
2013 ("Incorporating Sovereign Risk to EMEA Auto Loan methodology"),
along with the publication of its Special Comment " Structured Finance
Transactions: Assessing the Impact of Sovereign Risk", which
are available on www.moodys.com and can be accessed via
the following links: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988,
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319469.
Other factors used in these ratings are described in "The Temporary Use
of Cash in Structured Finance Transactions: Eligible Investment
and Bank Guidelines", published in March 2013.
LIST OF AFFECTED RATINGS
Issuer: FTA SANTANDER CONSUMER SPAIN AUTO 2010-1
....EUR493.5M ANotes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Remained On Review for Possible Downgrade
....EUR57M B Notes, Confirmed at A3
(sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Remained
On Review for Possible Downgrade
....EUR49.5M C Notes, Upgraded
to A3 (sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under
Review for Possible Downgrade
Issuer: FTA SANTANDER CONSUMER SPAIN AUTO 2011-1
....EUR659.8M A Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR71.6M B Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR63.6M C Notes, Confirmed
at Baa2 (sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under
Review for Possible Downgrade
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sebastian?Schranz
Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Mehdi Ababou
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's concludes the review of two Spanish auto loan ABS with no negative actions
